Relatively little is known about the early events that result in specification of lung progenitor cells from the foregut endoderm. In vitro differentiation of embryonic stem cells (ESC) offers an unprecedented opportunity to investigate the mechanisms that control lineage specification and differentiation of a variety of cell types. In contrast to animal models, ESC culture systems allow easy access to cells at early developmental stages when lineage commitment decisions are taking place. With regard to lung epithelial lineage specification, this proposal presents a novel ex vivo system where undifferentiated ES cells are directed through a controlled sequence of differentiation events that model in vivo developmental milestones. Through three specific aims this system is employed to recapitulate the specification of Ttf1+ lung progenitors from multipotent endoderm.The overall approach is to employ a novel mouse ESC line with GFP cDNA targeted to the brachyury locus and a human CD4 reporter targeted to the Foxa2 locus in order purify cells resembling a primitive streak-like stage. These cells are then differentiated in cells with multipotent endoderm capacity. We propose to develop a novel methodology for the purification of Ttf1+ lung progenitors as they are specified from these multipotent endoderm-stage cells. Finally, the system is applied in order to define the the roles of FGF signaling, canonical Wnt signaling, and chromatin remodeling mechanisms in early lung lineage specification. The ultimate goal of these studies is to develop an in vitro system that can be applied to study the complete genetic and epigenetic programs responsible for lung epithelial development.